$880 Trillion and Counting

Pay No Attention to that Man Behind the Curtain

Written by Adam English
Posted May 1, 2013

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”  — Henry Ford

Leave it to a man who started his company during the Gilded Age to coin a phrase that is more relevant today than ever before.

It is all too easy to fall into the comfort of a false reality created by a minority that rules the global economy...

Hidden behind a shroud of fog created by the world's sheer disbelief that anyone could become so corrupt and depraved, an ivory tower of privilege and entitlement houses the select few to whom the wealth of the entire world is traded for favors and small gifts on a daily basis.

I wish I could say that this the beginning of a work of pure fiction, or the basis for one of the conspiracy theories that the ruling class and their shills spend so much time and effort ridiculing and debunking. But with so few manipulating $880 trillion to boost their personal fortunes, defrauding billions of people worldwide in the process...

I can't.

“Pay No Attention to that Man Behind the Curtain”

When you are manipulating 12 times the world's entire GDP for your own gain, you have to do it in front of everyone. The trick is making sure they aren't paying attention.

Take, for example, the LIBOR scandal: It involved creating an oligarchy of powerful interests that were using increasingly complex and simultaneously obscure benchmarks, far removed from the day-to-day lives of the masses.

In 1984 a group of UK-based bankers and financiers saw the rise of interest rate swaps, foreign currency options, and forward rate agreements as a source of untapped potential profits. The only thing holding back greater gains was some sort of unifying standard. So they took it upon themselves to create a system where they self-reported the rate at which they are willing to lend to each other.

The ability to skew results for personal profit existed from day one.

It was only a matter of time before the cut-throat nature of international banking and the rise of global interbank funding created a system that gave them the ability to skew $500 trillion worth of transactions...

The $380 trillion of manipulation now being uncovered came from an obscure monopoly created for a single company — ICAP Plc.

We've seen this movie before: Trust was instilled in a few to create efficiency for the broader market through standardization. And that trust was betrayed.

Absolute Power

Eleven years ago, ICAP Plc. became the sole operator of a screen used by the industry to price interest rate swaps worth $379 trillion. 

Big cities, major corporations, and governments use these swaps to manage their debt. About 6,000 firms subscribe to the screen for daily prices and rates used by corporate treasurers and money managers to value positions.

The rates produced by ICAP Plc. have drawn the attention of the Commodity Futures Trading Commission, which recently subpoenaed about a dozen current and former ICAP brokers and as many as 15 dealers to determine if they’re colluding to create inaccurate quotes that would boost bank profits.

The profiteering wouldn't have existed without the ability of ICAP brokers to pad their own coffers.

With the pay system currently in place, who could ever doubt their monopoly over the system would be abused?

The firm paid brokers an average of 61% of the revenue they generated in the six months ending in September, according to a presentation ICAP gave on November 14, 2012. The firm pays brokers who use its electronic trading systems about 10% to 15% of revenue they generate as well.

A team of roughly 20 people in ICAP's Jersey City, New Jersey offices made about $100 million to $120 million annually for the company around 2008 and 2009 alone. And the top brokers on the desk made $5 million to $7 million per year during the best years, according to an anonymous source quoted by Bloomberg news. The lowest payout amongst this small group of brokers banked $1 million to $2 million per year.

The exorbitant pay earned the small and incredibly powerful office the fitting nickname “Treasure Island.”

Once again, the manipulation was hiding in plain sight, but was obscured from our day-to-day lives.

None of this would have come to light if public outcry over the LIBOR rate fixing scandal hadn't reached a fevered pitch.

Emails released as part of the European LIBOR probe detail how ICAP brokers in London directly passed on requests from dealers asking the corrupt LIBOR rate-fixing brokers at rival banks to make favorable submissions.

The CFTC is also investigating whether ICAP brokers delayed updating rate-swaps prices after they facilitate trades between banks. This is possible because ICAP enters the prices manually onto the screen, which then become the legal prices at which swaps traders can terminate contracts or mark the value of positions...

Brokers were able to delay putting trades into the system at the behest of the dealers instead of in real time, forming an obscene type of post-dated arbitrage.

A Slap on the Wrist, a Wag of a Finger

We can hope the CFTC and their counterparts across the Atlantic in Britain's Financial Services Authority will bring down the hammer...

Unfortunately, it's more likely that will never happen. One glance at the fallout from the mortgage profiteering fiasco and the LIBOR scandal show the precedent...

Government officials tasked with cutting this cancer out of the system are weak and afraid.

This shaky foundation for a house of cards 12 times larger than the $71.8 trillion GDP of the entire world in 2012 was created by the very people who are exploiting the situation.

Once again, their out-sized power over us forms the basis for their protection. And once again, they will come out on top in spite of their part in committing unethical crimes against us.

No one will go to jail, and quarterly profits will barely see a dent.

Eric Holder, outgoing U.S. Attorney General, stated as much outright in front of a Senate committee in March: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them... if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy."

Lanny Breuer, former head of the Justice Department's criminal division, led the investigation into the big banks and Wall Street firms that caused the financial crisis and presided over the lack of prosecution and accountability... Now he is making $4 million per year as a lawyer with his old law firm, Covington & Burling, and was part of the all-star legal team fielded by “too big to fail/jail” megabanks.

In a landmark class-action LIBOR lawsuit, a federal judge accepted their absurdly incredible argument...

If cities and towns and other investors lost money because of LIBOR manipulation, it was their own fault for believing that the banks were competing against each other in the first place.

$880 Trillion and Counting

So here we are, with a brief glimpse at the man behind the curtain...

And yet we are powerless to bring justice to and shed light on the corrupting cancer that is sapping the strength of capitalism.

We've seen the value that these power brokers place on us through the emails they have sent back and forth from LIBOR lawsuits...

The benchmarks of the entire global economy are only worth a free sushi lunch, a favor down the road, a bottle of champagne. That is the value of your decades of sacrifice and hard work as you try to create a better future for yourself and your children in the ivory tower.

Perhaps the best words to describe how we feel when we get a glimpse of our depraved and depressing reality were penned by a man persecuted hundreds of years ago for trying to expose the sins of the all-powerful elite...

“One day, everything will be alright, this is our hope; Everything is fine today, here is the illusion.” — Voltaire (François-Marie Arouet)

Take Care,

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